Fixed-charge coverage ratio

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Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of (Earnings before interest, depreciation and amortization minus unfunded capital expenditures and distributions) divided by total debt service (annual principal and interest payments). Notice that lease payments are sometimes included in the calculations.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Fixed-Charge Coverage Ratio

A measure of a company's ability to pay its fixed expenses, such as rent and interest, on debt without resorting to more debt. A ratio over 1 indicates that the company is able to pay its fixed charges, while a ratio below one indicates the opposite. The fixed charge coverage ratio is calculated thus:

Fixed-charge coverage ratio = (EBIT + fixed charges before tax) / (fixed charged before tax + interest)
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Structural features often limit distressed retailers' access to their facilities, including springing borrowing restrictions if fixed-charge coverage ratios fall below 1x, reserve requirements or cash dominion.
* Fixed-charge coverage ratios above 2.5 times (current industry average is 2.1x)
Fixed-charge coverage ratios are anticipated to stabilize close to the 7.0x range in 2018 with more normal catastrophe losses and as underwriting performance remains pressured by price competition in most product segments.
Similarly, if the entire $1.85 billion termination is included in Fitch's projections of ANTM's near-term EBITDA-based fixed-charge coverage ratios, the ratios decline to 5.3x-6.2x.
Operating EBIT and fixed-charge coverage ratios are expected to deteriorate in 2016, as core underwriting performance is likely to decline.